Over a span of 18 years, Ohio State failed to provide about 270 full scholarships that it committed to provide in exchange for accepting the Moritz endowment. Instead of providing those promised scholarships, Ohio State spent that money to entertain wealthy “friends of OSU.” All without the Moritz family's consent or the knowledge of the students who had to pay full tuition instead of receiving a free education paid for by this endowment.
There are currently thousands of restricted endowment funds totaling tens of millions of dollars held by Ohio State University.
In May of 1994, Ohio State trustees voted to adopt the resolution implementing a “development fee” of about 1% on gift donations/endowments.
In total, we estimate that nearly $20 million in cumulative “development fees” have been taken from these restricted endowments to pay the salaries of university fundraising employees, banquets, social events and the cost of entertaining rich patrons.
Nearly 2,000 donors to Ohio State entered into restricted endowment agreements with the university, providing millions in exchange for OSU’s commitments to spend those funds only for the purpose specified in those agreements. But Ohio State did not tell those patrons that it would be spending their restricted money for things they did not approve—such as entertaining other patrons—while shortchanging the educational benefits that the donors insisted their money was to provide.
The massive funds spent through this silent siphoning of a “development fee” from restricted endowment funds diverts money away from student scholarships and other specific academic commitments that Ohio State made to its current benefactors. Plus, Ohio State takes all earnings on these restricted endowments for the first six months after Ohio State receives the money. The combination has resulted in Ohio State actually spending part of the principal of endowment funds for purposes unknown to the benefactor. Continuing on that path could permanently wipe out entire endowments that Ohio State committed to maintain forever.
OSU’s investment strategies have been so terrible that its return on investments in its endowment underperforms most universities nationwide as well as the Big Ten over the past 15 years. There have been three chief investment officers over the past ten years.
Ohio State’s handling of donor funds has a longstanding infection of indifference. In 2007, Ohio State’s Treasurer retired after he was accused of mismanaging endowment funds and providing misleading information about the endowment to donors and trustees.
As a result of the “development fee” and horrific investment choices, Ohio State had so many restricted endowments “underwater” that it took money from the sale of university assets to shore up a portion of these funds-just to bring them up to their original levels.
Ohio State spends endowment money on ‘developing’ more ‘friends’ even if the endowment earns no money from investments. Continuing that practice eventually will wipe out entire endowments that Ohio State committed to maintain forever.
The money drained from the Moritz endowment alone was about $3 million over its first 14 years, and OSU continues to take more and more money to pay for development officers and their social events. With lost investment returns that equates to over $6 million removed from just one restricted fund, resulting in lost scholarships for students.